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Suppose the government proposes a relief package in an urgent attempt to bail out virtually all...

Suppose the government proposes a relief package in an urgent attempt to bail out virtually all industries across the board and offset the economic damage unleashed by the 3-month long coronavirus [COVID−19] crisis episode, and indeed, keeps its promise.
Required: By approximately what factor [in the long-run] are businesses likely to discount their negative cash flows, to work out how much is needed to level their current losses?

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Expert Solution

Factors which business will be likely to report in order to discount the cash flows to work out how much needs to be adjusted to label their current losses are as follows-

A.the farm need to re adjust the growth projection and it will help the company in order to adjust the cash flows of the future.

B. The company also needs to readjust the discounting rate so that the company can readjust the cash flows accruing in the future

C. The company should also be trying to ascertain higher rate of discounting into the cash flow projection so that the negative cash flow can be factored into the overall future of the company.

D. The company should also be trying to discount the risk exposure which are mostly macro is into its overall cash flow projection.

E. The company should also be trying to allot a higher rate of default in his overall valuation techniques so that negative cash flow could be discounted

jeff jeffy answered 1 year ago
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